ISS said Develop’s $150 million scrip offer was supported by “compelling strategic rationale” in a report seen by The West Australian. It highlighted the “enhanced financial flexibility” of the merged group would enable the development of Essential’s Pioneer Dome lithium project, north of Norseman.
The proxy group also pointed out no superior offer had emerged since the Bill Beament-led Develop announced its offer for Essential with the blessing of the company’s largest shareholder, Mineral Resources, and the downside risk to Essential’s share price if the scheme of arrangement doesn’t go ahead.
However, it said shareholders should note an independent expert’s report by BDO had concluded the agreed one-for-6.18-shares bid not fair but reasonable, saying it undervalues the lithium play.
BDO’s recommendation, however, is based on a preferred post-deal value for Develop of just $1.73 a share and has been criticised by Mr Beament. The stock closed at $3.15 on Wednesday.
ISS also said Develop shares had declined since the announcement of the deal but concluded “the advantages of the proposed scheme outweigh the disadvantages”.
Mr Beament, Develop’s managing director and an 18.3 per cent shareholder in the company, unleashed on BDO after the report was released last month, questioning the gap between its valuation and the market price.
“Please tell me where I can buy Develop shares at $1.73,” he said.
“I have spent more than $10m buying Develop shares in recent months and I paid up to $3.20 a share.
“And I certainly believe that I got more than fair value.
“It was great value.”
Essential directors have reiterated their support for the offer in the absence of a superior bid, urging shareholders to vote in support of the scheme of arrangement at a meeting set for October 18.
VHM Limited, a rare earths developer backed by mining billionaire Chris Ellison, missed a third deadline to sign a deal for the sale of the majority of its products to Chinese giant Shenghe Resources.
Unseasonably warm weather helped push coal power generation to a new low, further undermining the economics of ageing plants that are being forced to ramp down through the day to avoid losses but are still needed to keep the lights on.
